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spk12: Good day, and thank you for standing by and welcome to the Berry Global Earnings Call. At this time, all participants are in the listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Dustin Stilwell. Please go ahead.
spk08: Thank you and good morning, everyone. Welcome to Barry's fourth fiscal quarter 2021 earnings call. Throughout this call, we will refer to the fourth fiscal quarter as the September 2021 quarter. Before we begin our call, I would like to mention that on our website, we have provided a slide presentation to help guide our discussion this morning. After today's call, a replay will also be available on our website at barryglobal.com under our investor relations section. Joining me from the company are I have various Chief Executive Officer Tom Salmon and Chief Financial Officer Mark Miles. Following Tom and Mark's comments today, we'll have a question and answer session. In order to allow everyone the opportunity to participate, we do ask that you limit yourself to one question at a time with a brief follow-up and then fall back into the queue for any additional questions. As referenced on slide two, during this call, we will be discussing some non-GAAP financial measures, the most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and investor presentation on our website. And finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including but not limited to those described in our earnings release and a report on Form 10-K and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company differ materially from those expressed or implied in our four looking statements. Now, I'd like to turn the call over to Barry's CEO, Tom Salmon.
spk06: Thank you, Dustin. Welcome, everyone, and thank you for being with us today. Let's begin this morning on slide four, where we've laid out our key takeaways for today. First, Our fourth fiscal quarter results were solid, as revenues were a record for any September quarter and free cash flow was a record for any period in our company's history, in spite of unprecedented inflation and supply chain challenges we faced across the world. For the fiscal year 2021 was another outstanding year at Barry, as we achieved 4% organic volume growth on top of 2% in fiscal 2020, with all four segments delivering strong organic volumes during the year. Revenues and adjusted earnings per share, which were both annual records, grew by 18% and 20% respectfully. Our teams have worked diligently to offset the challenges created by COVID, inflation, labor, and supply chain challenges, while demonstrating an exceptional ability to remain focused on driving long-term sustainable growth and delivering the results you see today. Barry's resilience is a continued reminder of the diverse and robust global portfolio we've built through strategic portfolio management. The second key takeaway was our commitment to improve our strong balance sheet and drive leverage lower. I'm proud to say that as a result of our strong and stable earnings and cash flow, we've been able to reduce our leverage by a half a turn since the beginning of fiscal year, and a full turn in just two years, ending the year at 3.8 times net debt to adjusted EBITDA. Getting below four times was a top priority for us, and as we've stated before, we anticipate operating our company in a leverage range of 3 to 3.9 times. And lastly, we are focused on capitalizing on our strong base by investing in a number of organic growth initiatives, including innovation and sustainability-led projects, which will maintain our growth momentum in fiscal 22 and beyond. Next, let me turn to our number one core value on slide five, and that's safety. Keeping all our teammates healthy and safe is a key priority. As you can see on the slide, we have an ongoing commitment to identifying, managing, and minimizing safety risk. During the past few years, the pandemic presented many challenges across our global footprint. Our GlobalBerry team stepped up, took on the challenge, implemented and maintained new protocols while keeping each other safe. And in spite of these added challenges of operating during the pandemic, our safety performance has continued to show improvement and we're very proud of our industry leadership delivering an OSHA incident rate below one for the fiscal year 21, significantly better than the industry average of 3.7. Our team's emphasis on working safely and servicing our customers has ensured an uninterrupted supply of the essential products that we produce. This has made us a stronger and better company, giving us great optimism on the company's future success. Additionally, as you can see on the slide, We have a strong commitment to ensure that we are providing better opportunities and bringing innovation to provide multiple lives to natural resources while heading many initiatives with industry and external partners to improve circularity and our carbon footprint. Turning now to the financial highlights on slide six. For the fourth fiscal quarter, revenue was up 22% and was a record for any September quarter. Overall demand for our products remained solid and certain markets, which previously experienced pandemic headwinds, continued to improve. Volumes for the quarter were essentially flat, coming off a strong prior year comparison of 4% in September 2020. Pre-cash flow was a quarterly record at $512 million. Throughout fiscal 2021, we experienced significant cost increases in our primary raw material, that being resin, as well as inflation, other raw materials, freight, and labor on top of supply chain challenges. As you can see, we experienced a significant increase in the level of inflation and recovered 92% of record cost inflation in the September quarter and 95% of the over $1.5 billion of cost inflation during the fiscal year. As we've demonstrated historically, we remain committed to passing through cost inflation and believe we are well positioned, given our scale, to serve our customers with our facilities in close proximity to their locations. looking at some of our financial year highlights on slide seven. Fiscal year 21 was an exceptional year with record revenues and earnings, leverage reduction inside our targeted range, along with an unwavering commitment to service our customers in a challenging supply chain environment through much of the fiscal year, all while building strong momentum in each of our businesses heading into fiscal year 22. For the year, revenue is up over 18%, including organic volume growth of 4%, with all four segments showing 3% or more organic volume growth. From an earnings perspective, our operating EBITDA increased by 3% on a comparable basis to a record $2,224,000,000. Adjusted earnings per share was also an annual record and increased by an impressive 20% to $5.80 per share. Additionally, as I mentioned, we have used our consistent and dependable free cash flow to further strengthen our balance sheet, and have reduced net debt over $1 billion in the last four quarters and ended the year inside our leverage range target. Our employees around the world have shown an unwavering attention on executing against our strategies, and as a result, we delivered on our priorities with another year of exceptional results while building strong momentum going into the future. Now I'll turn the call over to Mark, who will review Barry's financial results in more detail. Mark?
spk09: Thank you, Tom. Looking at the quarterly and fiscal year performance for each of our four operating segments, starting on slide eight. For the quarter, our Consumer Packaging International Division delivered a 12% improvement in revenue, primarily attributed to an 11% increase in selling prices from the path through inflation, while volumes were essentially flat. Regionally, we had modest volume declines in developed markets, which had very tough comparisons, and were mostly offset with stronger growth in emerging markets, such as India and Eastern Europe. From a market perspective, categories such as food and beverage and food service saw solid volume growth, while industrial categories experienced modest headwinds related to supply chain disruptions at our customers. Operating EBITDA in the quarter was modestly down, primarily attributed to the timing lag of recovering inflation. For the year, revenue improved by 12%, including organic volume growth of 3%, led by emerging markets and product categories such as food, food service, and industrials. Operating EBITDA for the year was up 6%, primarily driven by the organic volume growth, foreign currency translation, and productivity gains, offset by a timing lag in recovering cost inflation. Next, revenue in our consumer packaging North America division was up 31% in the fourth quarter as a result of the pass-through of inflation. Volumes were 2% lower in the quarter from supply chain challenges and certain categories normalizing from COVID. Volumes were up 4% over the pre-pandemic level from the fourth quarter of 2019. For the fiscal year, revenue was up 23%, primarily from the past year of inflation and a 4% increase in organic volumes driven by continued strength in food service and beverage products. Operating EPDA was down for the quarter and fiscal year due to the timing lag of passing through cost inflation and costs related to managing supply chain challenges. Fiscal 21 represents the fourth consecutive year of organic volume growth delivered by our CP&A team. Continuing the strong momentum, we recently announced $110 million expansion for our clear, sustainable food service packaging to manufacture clear drink cups and lids for quick-serve restaurants, coffee shops, and convenience stores. These investments are customer aligned and the clear design fills an increasing demand for a cup that showcases the customer's premium brand image and beverage appeal and improves restaurant operation efficiencies while offering a more sustainable option compared to the customer's current cup offerings. On slide nine, our health hygiene and specialties division delivered a 21% increase in revenue, primarily attributed to the pass-through of inflation, partially offset by an organic volume decline of 3% on the quarter from the pandemic-driven strong volume quarter a year ago, where we generated 12% volume growth. The continued recovery in the building and construction markets was partially offset by strong comparison in the healthcare and hygiene markets a year ago. Organic volumes grew an impressive 9% over the pre-pandemic level in the fourth quarter of 2019. Fiscal year 2021 delivered organic volume growth of 5%, building upon the very strong prior year growth of 6%, driven by strong demand for our hygiene and healthcare products, including hard surface disinfecting wipes, healthcare protection apparel, and premium hygiene. Operating EPA for the fiscal year increased by over $90 million, or 19%, primarily driven by the organic volume growth, favorable product mix, and cost productivity. For the year, we estimate that the favorable product mix related to COVID-19 was approximately $40 million higher than fiscal 2020. And lastly, revenue for our engineered materials division on a comparable basis adjusted for divestitures was 38% higher in the fourth quarter, primarily attributed to the pass-through of inflation along with organic volume growth of 1%. Volume growth in the quarter was primarily driven by partial recovery of our can liner business in the U.S. along with growth in our e-commerce and protective films, which was partially offset by supply chain challenges. For the full fiscal year, our engineer materials business delivered strong organic volume growth of 4% as we continue to make strategic investments in areas such as e-commerce and food and beverage safety packaging. Operating EBITDA for the quarter and full year was lower as a result of the timing lag of passing through inflation and costs related to managing supply chain challenges. The fiscal 2021 results are yet another example of our proven performance over many different economic cycles. As you can see on slide 10, we have consistently driven top-tier results in nearly all key financial metrics, including strong compounded annual growth rates for revenue, earnings, and free cash flow, including growing our adjusted earnings per share every year as a publicly traded company. Our business model is very resilient, including the broadest portfolio plastic packaging solutions with sizable, dependable, and stable free cash flows to allow us the flexibility to drive strong returns for our shareholders. Next, our fiscal year 2022 guidance and key assumptions are shown on slide 11. In order to better align ourselves with our peers, we are now guiding to earnings per share and free cash flow. We are expecting to deliver between $7.20 to $7.70, of adjusted earnings per share, which includes amortization of intangibles from acquisitions. For comparison purposes, our fiscal year 21 adjusted earnings per share was $7.21. Additionally, for fiscal 22, we expect free cash flow of $900 million to $1 billion, along with 2% organic volume growth. Given the timing lag of passing through inflation and continued improvement in the supply chains, We expect fiscal 22 earnings to be stronger in the second half. Our guidance incorporates our commitment of recovering cost inflation and includes recovering the majority of the unfavorable lag experienced in fiscal 21. Partially offsetting the inflation recovery, we are conservatively expecting the majority of the favorable product mix, primarily inside our HHS segment, to not continue in fiscal 22. With organic volume growth expected to be 2%, our comparable EBITDA is expected to be 3% to 7% higher versus the comparable prior year. In line with our assumptions for earnings per share, we expect volumes and operating EBITDA in the first half to be flat to modestly negative versus the prior year due to our very strong December and March quarters a year ago, where we delivered volume growth of 7% and 5% respectfully. But we expect the second half to produce low to mid single-digit growth. On slide 12, for free cash flow, we expect to generate $900 to $1 billion. This includes cash from operations of $1.7 to $1.8 billion, less capital expenditures of $800 million, as we continue to see a strong pipeline of growth and cost reduction projects with returns well above our cost of capital. I am extremely proud of our team's execution in delivering on our cash flow guidance every single year since we started providing guidance nine years ago. Our capital allocation plan is clear with a flexible return-based focus versus a more rigid fixed strategy. We intend to use our strong, dependable, and consistent free cash flow to finance customer-supported investment around driving sustainable long-term organic growth supported by active portfolio management that enhances our organic growth potential through strategic acquisitions and divestitures and opportunistically repurchasing shares while staying within our targeted leverage range. This concludes my financial review. Now I'll turn it back to Tom.
spk06: Thank you, Mark. Before we close our prepared remarks today and open the call for questions, I want to reiterate that we will continue to focus on what has been a driving our strong results over the past two years. We continue to invest in each of our businesses to build and maintain our world-class, low-cost manufacturing base with an emphasis on key growing markets and regions continue to see incremental opportunities to invest organically in support of our unwavering commitment to global growth. Overall, the diversity of our end markets and product offerings, as well as the essential nature and demand consistency of our products, have been core to the underlying performance of the business. I'm very confident in our team's ability to meet our near-term and long-term expectations and commitments to provide sustainable, profitable growth. Near-term and We are a dependable, low single-digit growing business that is supported by a robust pipeline of new, earned, and secure business, which we believe is enhanced as we increase our exposure in faster growth markets such as healthcare and pharmaceutical, along with new sustainable technologies. As I mentioned, we have several drivers that we've highlighted on previous calls for organic growth shown on slides 13 and 14, including the aforementioned focus on both faster growth and markets with sustainability-led packaging. We believe that by increasing our presence and making gradual moves into faster-growing markets, along with continuing to invest into emerging market regions, we will be positioned to provide consistent, dependable, and sustainable long-term growth. We will continue to focus on global megatrends as we expect emerging markets to grow faster than advanced economies, and we believe there will be a considerable need for our protection products in regions with rapidly increasing populations. In line with our focus on increasing our presence in the health and wellness area, we announced earlier this year approximately $110 million of capital investments in both rigid and flexible healthcare solutions in the United States, India, and China. As part of this investment, we are opening another manufacturing facility and global healthcare center in Bangalore, India. Additionally, we commercialized our first U.S. comprehensive commercial-scale cleanroom for our nine-layer blown film manufacturing line which also supports our healthcare business in rigorous healthcare and pharmaceutical applications. Furthermore, on slide 14, we believe the continued focus on sustainable solutions will be a powerful growth driver for us in the years ahead. For example, we believe our polypropylene drink cup is the most widely recyclable cup for quick-serve restaurants and convenience stores, having the ability to incorporate recycled content while not diminishing performance or clarity attributes. Our demand and growth pipeline for these products, including other beverage and spirits products, has been strong and we expect further opportunities to continue to grow these products and capture share from alternate substrates. We are committed to remaining at the forefront of the innovation necessary to meet customer sustainability goals through investments in the latest equipment technologies and managed field development and innovative design for circularity. In combination with our focus on sustainability and innovation, We recently announced our collaboration with Wendy's and Lyondell Bazell to improve cup recyclability and introduce expansion of our industry-leading clear drink cup offering, as you can see on slide 15. The collaboration will support both the industry's move to create multiple lives for packaging products through advanced recycling, along with Wendy's move from their plastic-lined paper cups with limited recyclability to our new single-substrate clear drink cups that more consumers will be able to recycle. an important pathway towards circularity. Based on a mass-balanced approach, the CUPS will also use 20% ISCC-certified recycled plastic across all North American restaurants. A quick-serve industry restaurant first, with the potential to increase that amount of recycled plastics used in the future. Giving our natural resources multiple lives requires commitment and collaboration across the value chain. Partnering with leading brands that actively pursue opportunities to promote innovative packaging solutions is the key to accelerating a circular economy. This is just one example of many similar partnerships that Barry has with leading companies across the world. New cup set will launch in restaurants in both United States and Canada in early 2022, with the initial set of large cups using recycled plastics. All drink cups will use recycled plastics in 2023. This important first step is estimated to divert 10 million pounds of waste from landfills over the first two years. The amount of waste diverted from landfills due to this collaboration is projected to only increase as Wendy's works with Barry to expand recycled plastics use throughout its entire cup set. Turning now to slide 16, as we highlighted on our last call and indicated in our Wendy's collaboration, we're very excited about the innovative circular solutions we are bringing to the market in close partnerships with our customers and suppliers. New technologies are becoming available that convert many forms of plastics into feedstock, including many that were previously considered to be unrecyclable, making more collaborations like the Wendy's announcement possible. You can see the sizable industry investments that are being made in infrastructure to lower the cost of post-consumer recycled material, increase capacity worldwide, and attract future value-added investments. We believe, as already a global leader with scale, we will have unparalleled access to recycled content, affording us the opportunity to provide sustainable packaging worldwide to ensure and aid our global CPG customers to meet their commitments around sustainability. Ultimately, plastics are the most advanced, versatile material, and it's hard to imagine any state-of-the-art solution that will help us achieve net zero without the use of plastics. We believe plastics are a critical part of the transition to net zero by 2050. With Berry Global's capabilities, designed for circularity expertise and long-standing partnerships across the value chain, we believe that more brand owners will continue to partner with Barry to progress toward their sustainability goals. As evidenced by our supply chain collaboration, we continue to focus on circularity and improving reclamation capabilities to help our customers meet the growing sustainability demand trends of today and tomorrow. Leveraging our unmatched global scale, sustainability leadership, and deep innovation expertise, we design and develop products that help advance a circular economy. Today, as you can see on slide 17, we announce our most ambitious sustainable packaging goal to date, 30% circular plastic use across our fast-moving consumer goods packaging by 2030. This is an increase from our original target of 10% and includes both recycled and renewable materials. Our new 30 by 30 goal aims to give natural resources multiple lives and introduce alternative renewable resources as the energy industry continues to pivot to recycle and renewable resources. We will meet this new goal through our leading access to innovative material streams, agility in our manufacturing capabilities, and our continued close customer partnerships who count on us to deliver innovations for the future of the world. We look forward to continuing to lead the way in driving innovation, sustainability-based growth, and announcing many more opportunities over the next several years. In summary, we have delivered outstanding results across the portfolio on all financial metrics, all in spite of an inflationary environment coupled with supply chain and labor challenges. We delivered on our strategic goals of driving organic growth, 4% for the fiscal year on top of 2% in fiscal 20, and improving our balance sheet, lowering leverage by five-tenths. to within our stated range to 3.8 times. These results are the byproduct of our continued focus on growth, improving our strong balance sheet, and designing products with sustainability in mind. And finally, with our consistent and dependable end markets, a leading cost position along with substantial capacity to invest in long-term, steady growth, we are confident in our ability to achieve consistent, low single-digit growth through our customer-linked capital investments, along with active portfolio management that targets continued expansion into both faster-growing end markets and regions. I thank you for your continued interest in Barry. At this time, Mark and I will be glad to answer any questions you have.
spk12: As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw a question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Anthony Pettinari from Citigroup. Your line is good.
spk07: Good morning. Tom or Mark, is it possible to parse out the 2% volume growth guide for 22 across the four segments, maybe directionally?
spk09: Yeah, we typically wouldn't give volume guidance by segment, but I would say generally we're Obviously, long-term, expecting all of our businesses to deliver long-term, low-volume, excuse me, low single-digit volume growth. Next year, there may be some, you know, pluses and minuses just as things recover from the pandemic and some of our more industrial businesses. But over the long haul, all should be low single-digit volume growers. Okay.
spk07: Okay. And then the... In terms of resin assumptions embedded in the guidance for 22, any additional detail you can give there? And just the general inflation and supply chain headwinds you've seen this year, do you expect those to ease or continue or get worse? Any kind of general thoughts there?
spk06: Yeah, it's amazing. We kind of take it for granted. Probably as an industry, we've been dealing with these types of challenges for almost 18 months now, and it certainly came to a crescendo here in fiscal 2021. But we assumed resin at the close of October, and so it's a conservative guide in that regard. And clearly, we continue to see all aspects of the supply chain continue to find ways to improve reliability and supply continuity. And we would anticipate that that would continue to improve, you know, each quarter, you know, throughout the fiscal year going forward. Okay, that's helpful.
spk09: I think you also asked about resin, maybe at the beginning of the question. We've assumed kind of current pricing, which, you know, October is has settled. November is yet to settle. October was the first month where we saw our primary materials start to roll over, that being predominantly polyethylene and polypropylene resin. So we'll see how the year unfolds, but our guidance assumes current pricing. Okay.
spk07: That's helpful. I'll turn it over.
spk12: Your next question is from George Stathis from Bank of America. Your line is open.
spk10: Everyone, good morning. There's an echo on the line from the analyst, so apologies if you can't hear me so well. I want to go to slide 10 and 11, Tom and Mark. You've put up terrific performance, certainly versus peers, over the last, well, really better part of a decade since you were public. And if I look on slide 11, you're now adding back the amortization from acquisitions, which a number of your peers do. Now, that peer set also has very specified value return criteria to investors, both in terms of buyback and dividends. Can you outline for us now given the performance in 21 and over the last decade, which has been very good, why you don't have specific targets right now on dividends, on buyback. What are you looking for in terms of leverage to get to that point? Is there some risk factor that you're adjusting for in terms of your value return target? How would you have us think about that? And at a minimum, you're looking for a share count of around $141 million in your guidance, which is up from the $138 in the last quarter. Can we at least expect that you'll try to buy back the dilution in fiscal 22? Thank you.
spk06: Thanks, George. I'm sure Mark will want to weigh in on this as well, but clearly we do have a long-term capital allocation strategy. It is purposely designed to be both flexible and a return-based strategy. First and foremost, we were pleased that as an industry leader, in terms of cash flow from operations in the $1.7 to $1.8 billion range, it gives us a lot of flexibility. And first and foremost, we prioritized our organic growth investments as a priority. And in our view, there's no greater way to stand behind the strength and value of our company than by organic growth investment, delivering growth in 2021, 2022, and we clearly expect this to be our third consecutive year of growth in 2022. Our pipeline is exceptional. Our opportunity to expand our business in emerging markets and targeted markets aligned with our customers Similarly, what you saw with our collaboration with Wendy's is unmatched in our view. And we're going to continue to bolster that. I'll also state, we are just now at the very top end of our range. We've noted portfolio management, both in form of acquisition and divestiture. We primarily have focused on divestiture. And granted, given the fact of the unpredictable nature of that category, it provides us more opportunity to further either reduce our leverage or opportunistically take advantage of buybacks, given that we already have an existing repurchase authorization of $400 million. And that's clearly how we're thinking about capital allocation. We think it's prioritized the right way around a return-based focus, and we think long-term it will deliver the best opportunities for our shareholders, both near-term and long-term.
spk09: Yeah, and on the returns part of that, George, I mean, we certainly obviously measure returns across all of our investments. You know, you can see the results. We've delivered strong returns. Return on capital, 14, 15 percent the last couple of years. And while that's objective, it's certainly obviously they have assumptions in them when you calculate returns. And risk is obviously something that is considered when you evaluate returns and what projects to invest in, whether or not they're organic, inorganic, or returning capital. So all those things are considered when we evaluate our options. We're fortunate, as Tom said, that we generate a lot of cash, and we got a lot of great options to drive returns for our shareholders. With respect to your, I think you also asked about share count. Yeah, we recognize that was a conservative assumption in our guidance, and we also obviously have the opportunity to drive that down if the company chooses based on share repurchases.
spk10: Okay, just a quick one and I'll turn it over. Would it be fair to say that you would put M&A ahead of value return given where the shares sit today? And how would dividends fit at all? It sounds like buyback will be how you return value to shareholders most over the next 12 months. Thanks, guys, and good luck in the quarter.
spk09: Yeah, I mean, obviously, we're very committed to staying in that range of 3.0 to 3.9. We're at the top end now. At 3.8, we're excited that we got the company back in the targeted range. As we said in the prepared remarks, we've got a flexible return-based approach, and we're fortunate that we have a lot of options, but we're not prescribing a fixed amount to any one particular category. Obviously, some of those are You know, the opportunities are unpredictable. Whether or not there's going to be M&A available at the right valuation is hard to determine.
spk10: I'll turn it over. Thank you. Thank you.
spk12: Your next question is from Ganshan Panjabi from Barber W. Beard & Company. Your line is open.
spk20: Thank you. Good morning, everybody. Just in terms of the supply chain constraints that you touched on in your prepared comments, can you just give us some color in terms of what exactly it cost you, the timeline to recover that? And then on the price cost mismatch of $66 million from the fourth quarter, how should we anticipate that evolving through your fiscal year 22?
spk06: We would anticipate being ostensibly price-cost neutral by the third quarter of our fiscal year, Ganshan.
spk20: Great.
spk06: Great.
spk09: Yeah, and that's a flat resin assumption, as we said earlier.
spk20: Understood.
spk06: And the supply chain constraints? Yeah, like I said, they've continued to get better. The resilience of our team, we've enabled the opportunity to source material now in a more fluid way from different geographies around the world. We've continued to expand the number of qualified materials that we have. We are not relying heavily on to a large extent where we can control imported goods. We're serving our local markets with local supply chains, and that, frankly, is an advantage given the proximity of our locations to our customers. It really delivers that assurity of supply, which we believe is the right model for us going forward, and we're excited about that.
spk20: Okay, then, Tom, on the circularity component that you outlined, the 30 by 2030 model, You know, how do you see the various buckets kind of playing out between mechanical, you know, mechanically recycled resin versus chemically recycled resin versus bioplastic? How do you sort of envision that constituency, if you will, relative to that 30% you outlined?
spk06: Yeah, it's no one solution is going to win the day. It's going to be a combination of really all of them. We're pretty well balanced. significant investment in post-consumer recycled materials with a strong investment position throughout Europe. The advanced recycling communications that we've made, the commercializations that we've made, are similarly going to potentially provide very large-scale ability to reduce plastic waste, to incorporate materials that are otherwise difficult to recycle, and ultimately provide virgin-like quality from those outputs. And the bio-based materials are right behind that, and we continue to incorporate those in solutions, and I think they'll continue to evolve. I think the biggest takeaway is that we felt early on that our number one role was demand creation, closely followed by education to drive that demand. And you can see it with the type of commercializations we're able to announce, the type of collaborations that this has enabled, It's real. And the reason for us ultimately expanding to 30 by 30 was based on the pipeline of opportunity that we have as a company, and I couldn't be more excited about it. And it's something I think is going to go a long way towards helping address plastic waste, which is something that we've been passionate about for quite some time, and not cause the consumer to have to compromise for less effective packaging schemes.
spk20: Perfect. Thanks so much. Thanks so much.
spk12: Your next question is from Aaron Viswanathan from RBC Capital Markets. Your line is open.
spk14: Great. Thanks for taking my question. I guess I just wanted to understand the resin and price-cost impact. It looks like this quarter it was a little bit more outsized than normal or what we would have expected. You know, you called out kind of the $66 million, but When did that really materialize? I mean, did that materialize in, say, September? And now that we've seen October, you know, settle lower, is there an opportunity now to regain that as you go through the year? Or if prices do come down on the resin side, would you have to give back all the prices that you put in? Thanks.
spk09: Yeah, sure. So, yeah, certainly as resin has gone up, you know, I think polyethylene for like 18, it was, I don't think it had gone down for 18 months in the U.S. until the October move, if my memory is right. But, yeah, certainly we've built up a significant lag with our customers on resin. You know, and as that moderates and, you know, we would get that back and to the extent it goes down, you know, we would recover some of the negative lag that we experienced on the way up. I'd say what the acceleration was more in the other purchased items. You know, our other inputs, things like pallets, liners, colorants, boxes, that inflation doubled from the third quarter. So just as there's a lag in recovering resin, there's a lag in recovering those other raw materials. And so there was a step change in the cost of inflation. You saw our total inflation go from $500 million last quarter to over $700 million in Q4. We're committed to recovering it. There's just a timing lag. And as Tom said, I think, in the prepared comments, you know, we did a great job of passing it through. We just got more work to do.
spk14: Gotcha. Thanks for that. And then if we look about free cash flow, similarly, you know, you're guiding for the, you know, wide range, which we can understand since you're just starting the year. But assuming that RAS do moderate as we progress through 22, is that the main swing factor that would push you at the upper end? Or is there, you know, volume or price-cost considerations that we should also kind of keep in mind?
spk09: No, no, I mean, yeah, certainly price-cost is probably the biggest mover relative to the low end and the high end of the range. I would agree with that.
spk14: Okay, thanks. Okay, thanks.
spk12: Your next question is from Adam Samuelson from Goldman Sachs. Your line is open.
spk04: Yes, thanks. Morning, everyone. First question is a bit of a clarification on something that came up in the prepared remarks around HHS and the mixed benefits. It seems that, if I heard correctly, 40 million benefits for the year, which would have implied that that flipped to a pretty notable headwind in the fiscal fourth quarter. And I just want to clarify if that's actually correct and make sure I'm understanding kind of how that has evolved and what the expectation is for fiscal 22.
spk09: Yeah, great support. Sorry for the confusion on that. So the mixed benefits started in fiscal 20, started in Q3 of fiscal 20. And so we had about 50 million in fiscal 20. And that number was about 90 million and 21. So it's the year over year is the 40 million. So the total kind of mixed benefit was 90 million and 21, 50 million and 20. So the year over year is 40 million. Sorry for the confusion on that. It did moderate somewhat in Q4 relative to what we were pacing in Q3.
spk04: Okay, and as you think about that in the 22 guide, just what is assumed there?
spk09: Yeah, we've assumed that virtually all of that is gone in 22. Now, obviously, there could be some upside to that, but we've conservatively guided to very little benefit in 22. Okay.
spk04: Okay. And then, again, on the guidance, just to clarify, you talked about price costs and getting recovery for inflation. It would seem the fiscal 22 guide assumes kind of a net neutral price-cost balance where you're already behind coming out of 21. So is that conservatism on the pace of inflation and price recovery, or are you missing something there?
spk09: It's exactly what we just talked about. So the inflation recovery is being offset by the COVID mixed benefit. And so they're netting to a very small number.
spk20: Got it.
spk09: Okay. That's very helpful. Thank you. Thank you.
spk12: Your next question is from Chris Parkinson from Mizuho. Your line is open.
spk05: Great. Thank you very much. Thank you very much. So not necessarily on a segment level, but there have been a lot of moving parts heading into 2022. But if you can update us on your thoughts on H&W, e-commerce, and food safety outlooks, and how that flows into your aggregate 2% growth outlook, that would be very helpful.
spk06: In general, all businesses, we expect, you know, with deliver low single-digit growth. That's how we built the business over the long haul. No doubt we're going to have headwinds in the HHS business given the amazing costs we're facing from the prior year. But based on the capital investments that we've made and we've been continuing to make throughout the pandemic, we feel very good that in the back half we'll be able to see a recovery because these are all customer-linked investments that we're making. The capital projects alone are going to generate over $400 million of growth in 2022. You heard the investments that we're making, certainly in the food service space. That is all driven by the amazing demand that we're seeing in our clear drink cup solution, and that ultimately being translated potentially to other large QSRs inside the space. Strong food service is also complemented by what we have seen as a trend that continues around more at-home food consumption, you know, which is a plus. And similarly, at the end of our fiscal year and beginning in 2023, we have the benefit of a number of capital investments that we've, you know, previously articulated. A $70 million line in healthcare in China to support our HHS healthcare business. Already in place biopharmaceutical investments to support that space. a whites line in North America as well as Europe, and an ongoing business that's very strong to support engineering materials and e-commerce and building construction in HHS as well. Our CPI business, we continue to see food service and beverage strength and emerging market growth. We did have some weakness in industrials in CPI, most driven by supply chain challenges and our end customers not having access to materials that we believe we'll continue to mitigate over the course of the fiscal year.
spk05: That's very helpful. And just as a follow-up, just given the effort of Polypropylene Recycling Coalition, we've been hearing a lot about it for what it's worth. What else needs to be done to improve overall, you know, circularity and then the overall breadth of the opportunity, which you highlight on slide five. You know, it seems like there's a sincere goal, you know, amongst you, Lyondell, a few very large customers, but what else really needs to be done to make this financially material and improve the opportunity? So if you could just hit on, you know, just how this fits into the long-term profitability outlook, that would be very helpful. Thank you.
spk06: Yeah. I think what you should take advantage, take a homogen is that, You know, Barry increasing its objective to 30% by 2030 is correlative to the demand creation that we're enjoying. You know, whenever there's demand, it helps reduce, you know, the risk on capital investment in terms of a return. And our job continues to be continue to educate, continue to drive demand, and good things are going to happen in terms of the amount of capacity that's made available to the marketplace. And, you know, it's no different, you know, than an electric car. If you listen to the electric car pundits and talk about the expansion, they say electric cars will expand once the infrastructure to support the electric cars ultimately develops. And no different. As we continue to develop the infrastructure to support recycling and recovery, the opportunities to use these advanced technologies to promote circularized growth and ultimately allow us to decouple from fossil fuels is in front of us.
spk05: Thank you.
spk06: Thank you.
spk12: Your next question is from Kyle White from Deutsche Bank. Your line is open.
spk17: Hey, good morning. Thanks for taking the question. I wanted to focus on some of the non-material inflation. What are you guys doing in terms of combat against labor or transportation? Are you able to go out with any non-material price increases on this, and has that resulted in any increased churn? Is there any opportunity for maybe automatization in the business? Just any thoughts there.
spk06: We continue to find ways to automate and continuously improve our operations. The core confidence is what we do, and you can see it as part of our capital allocation program. In terms of labor, we've incorporated any type of anticipated inflation in our outlook for 2022 and in our guidance, and each geography is unique. Each geography is a different labor market across the 295 sites that we service. So we treat those all individually to make certain that we can be an employer of choice in the geographies that we serve. Relative to other raw materials, no doubt about it, it's probably been and it will probably be the last piece to recover. And yes, we have been able to go out to customers with out-of-market increases based on our stance, which throughout the pandemic has been make certain that beyond anything else, first and foremost, focus on service and delivery to our customers, and then we'll come back and we can worry about the price. We've been able to actually go out and recover some of that inflation that we've incurred based on the service that we've been able to provide our customers. Those supply chains similarly are beginning to mitigate, and to your point, seeking out alternatives, using our background and know-how in material science to ultimately reformulate have been some strategies that we've deployed to get that done.
spk09: Yeah, I would just add, look, while nobody likes inflation and we're doing everything we can to mitigate the impact, we remain committed to passing it through. And I'd say competitively, again, while we don't like it, it probably actually helps us given our scale and proximity to customer locations. To the extent freight costs are a higher percentage of the cost of the product are uniquely closely positioned facilities to customer locations puts us at an advantage. So, you know, you asked about churn. I wouldn't say that, you know, we've seen any increased level of churn. In fact, I would say, if anything, it's decreased over recent years.
spk06: I have to add to that, you know, throughout the pandemic and now the pipeline of growth opportunities and capital investments we can make linked with customers to grow our business has never been more robust than it is right now. And as Mark said, we are 100% committed. We will offset the inflation and at the same time continue to bring value to our customers. But I am very bullish on the long-term outlook for our company relative to growth, the way we've operated, the way we've served, and the way now that we are collaborating with customers to ultimately not only allow them to meet their growth objectives but also their sustainability objectives at the same time.
spk17: Got it. And then on alternative resin, as you move more and more towards using recycled resin or alternative resins, is the pass-through mechanism the same as it is with virgin resin? Or do you expect that these resins might be a bit more volatile given that the market isn't as established? Or maybe you're looking to kind of shorten the lag for these specific type of resins?
spk06: It's a fair question. The unique thing about the PCR-based, the advanced recycling, and bio-based materials is that they're typically incorporated a lower percentage of the overall volume up for the substrate. So while in some instances those materials have a higher cost, which similarly are tied to the same types of indices that we have on our base materials, it's a lower percentage of the overall product cost. As these technologies become operationalized, you will see the percentage of the content grow over time.
spk17: Got it. I'll hand it over. I'll hand it over.
spk12: Your next question is from Angel Castillo from Morgan Stanley. Your line is open.
spk01: Thanks for taking my question. I just wanted to continue, I guess, on the circularity and some of the agreements that you've been signing. Could you give us a little bit more color as to the structure of these agreements currently, how you kind of expect them to evolve in terms of becoming full contracts and As we think about this technology kind of proving itself out and moving from whether it's pilot plans to kind of full scale, how should we think about kind of Barry's, I guess, commitment to take that product and at what point it's actually kind of fully contracted?
spk06: It's a mixed bag. It's either at a minimum tied to a letter of intent, if not a contractual formal agreement. Our commitment is proven and demonstrated based on the commercial applications that we continue to market. This isn't just a headline for us in a marketing campaign. This is something that we're delivering with major brands around the world, whether it's Mondelez, ConAgra, Wendy's, just to name a few. So we're demonstrating that these are viable technologies in the marketplace, and I wholly anticipate we'll continue to drive more demand And that's the objective. As a leader in this industry and a thought leader around sustainability, the more we can do to create demand, the greater the likelihood is that larger scale facilities get built and operationalized, which brings down costs, makes it more widely recycled, creates the demand for the recycled content, which promotes the development of the infrastructure. So we believe we're an integral part of this and driving circularity. And we couldn't be prouder of how the team is ultimately acting around the world, both in terms of its affiliation with the necessary alliances to drive and promote the circularity, the infrastructure development, as well as the demand with our commercial organizations.
spk01: Understood. Very helpful. And then going back to the raw materials, I just wanted to clarify something. In terms of the EBITDA guidance, the higher end of the range, does that assume some raw material, I guess, normalization in terms of prices? And as we look at the consultant data for polyethylene and polypropylene, they have that kind of year-over-year and kind of the mid-teens to high-teens decline in terms of prices. Is that embedded in the higher end? And also, as you think about kind of sourcing currently, Are you operating any differently in terms of maybe deferring some purchases or running a lower inventory or anything as we think about the potential to buy at lower prices in the near future?
spk09: Yes, sure. As we said, the guidance assumes October polymer prices, so to the extent there's any change going forward, that would be a modification to our guidance. With respect to inventories, you know, our number one priority is servicing our customers. So we want to make sure we've got, you know, adequate materials and product to serve our customers. That's really our focus.
spk01: Very helpful. Thank you. Very helpful. Thank you.
spk12: Your next question is from Adam Josephson from KeyBank. Your line is open.
spk02: Hi, Mark Dustin. Good morning. Thanks very much for taking my question. Mark, just on... volumes given that it's we're more than halfway through the quarter can you provide any update on just volume trends thus far just relative to what you said about the first half of being flat to down and should we expect a gradual progression upward through the course of the year in terms of the volume numbers just given given the comp last year last year
spk09: Yeah, I think the last part of your question is the right way to think about it, Adam. We would expect volumes to improve over the course of fiscal 22 for the reasons that I think Tom mentioned earlier. 21, we started off, you know, 7% and 5% gross in December and March, respectively. Supply chain challenges continuing to abate. And the new capital that we've got, you know, that's being implemented, obviously we spent significantly more capital this past fiscal year, and we've got planned to even grow that more in 2022. So, as those projects come online with customer commitments behind them, we would expect the volumes to build over the course of the year.
spk02: Yeah, and I appreciate that, Mark. And in terms of on previous calls, you've occasionally given expected EBITDA weightings first half versus second half, and Just given that you're calling out this is a year of two halves, can you just frame for us roughly or precisely what you expect that percentage to be versus years past?
spk09: Yeah, I think it's pretty, you know, X21. I think 22 will look more similar to prior years. Q1 is typically in the low 20s, so 21, 22% of the total. And then the other three quarters are, you know, 25%. plus a percent or two. And I think, again, over the course of 22, it would be higher in the back cap.
spk02: Thank you. Thank you.
spk12: Your next question is from Josh Spector from UBS. Your line is open.
spk00: Yeah, hey, guys. Thanks for taking my question. Just to follow up on the CapEx build for 22 and really thinking over the next few years, Does that level increase further over time as you get more new circularity, et cetera, or is 800 kind of the right sustainable level for us to think about? And just related with that, it looks like maintenance ticked up about 50 million maybe from how you described it earlier. Anything to note around that?
spk09: No, on the last part, nothing notable of, you know, maybe there's some rounding in the percentages I think in the past week. It rounded it to 50, and this time it rounded to 45, if my memory's right. So I think it's just rounding, no change really in the level of maintenance capital. And the first part of your question, look, I hope so. I mean, I hope we continue to have great returning projects, which returns, again, well above our cost of capital with customer commitments. I think we're still in the early innings of globalizing many of our projects products where we've got advantages in certain product categories in certain regions. Obviously, that was a big positive to the RPC acquisition we made a couple of years ago, and we're still in the early innings of that. So I look forward to continuing to see opportunities from our teams to reinvest globally.
spk06: I echo that. I think it's a statement to the strength of our relationship with our customers and the premium brands we're doing around the world. And that integration of our global teams, it just continues to provide significant long-term revenue. possibilities for the company. So very excited about it. Be a good problem. High quality.
spk00: Yeah, thanks. That's helpful. Just quickly on inventories, where would you say your inventory level is and customers? And just to clarify, for working capital expectations 22, are you assuming flat or is there any build bake in there?
spk09: Yeah, we've got, with respect to working capital, a flat guide for 22. embedded in our guidance. That's our typical outlook for the year when we provide it. To the extent we have any updates as the year goes, we'll keep you apprised. I would say with respect to where we stand inventory-wise, it's going to vary depending on product and geography. In some cases, we're hand-to-mouth in some product categories, and in others, we've been able to build larger inventory positions. Again, our number one priority is continuing to serve customers
spk00: Okay, thank you.
spk12: Your next question is from Phil Nung from Jefferies. Your line is open.
spk11: Good morning, Tom, Mark, Dustin. This is John. I'm Phil Phil. I wanted to first start off commending you on the progress you guys have made for the advanced recycling and acting as an industry leader for the plastic industry. But I did want to touch a little bit more on the financial implications. You've talked about it a little, but in terms of the contracts from your suppliers and how it would match up with those of your customers, are they pretty well matched in terms of timing on the pass-through mechanism? And then thinking about the margin profile for some of these products, the higher PCR, the bioresins, et cetera, as you're increasing the percentage, within the products that you're making, are they coming in at higher margins than some of your current products? I would figure there would be some kind of elasticity on the end consumer side, you know, propelling the circularity of plastics and seeing that on store shelves. But are you seeing that actually materialize right now, or is it still too early?
spk06: I think it's, I'll start with the demand across the markets that we serve in Consumer Pax North America, Consumer Pax International, around sustainability continue to be amazingly robust. I'll remind you they are publicly communicated as well. We've been working with some of the leading brands that have the ability ultimately to pass any type of incorporated inflation tied to that content along. But again, because it's being introduced as a percentage of the overall substrate, it mutes the impact somewhat. Yes, we do have different suppliers, different agreements in terms of the resin pass-through. Many of them are traditionally built and reviewed on a regular basis. I'll remind you, we provide a vehicle to allow these companies to help scale this new and innovative technology. The ability to be an anchor customer as part of that allows them to ultimately increase their CapEx investment and increase the size and output of those facilities. And we think that's an integral role for us. I absolutely have complete confidence that you will continue to see increased use and expansion of these materials, and they'll incrementally grow over the next several years as the capacity gets increased and the scale gets operationalized. As it's operationalized, you'll start to begin to see, over time, more of an equilibrium between a virgin-based material and a recycled stream. And it would ultimately, over the long term, allow more companies to decouple, ultimately, from fossil fuel.
spk11: Excellent. And then just to follow up on that, the announcement you made with PureCycle and some of the others, L'Oreal's RevSol, What kind of due diligence are you doing on these advanced chemical recyclers? What goes into it in terms of is it just based on your needs from polyethylene, polypropylene, that type of resonance, or is it actually checking and seeing how well they can scale up their operations? Is it location of their footprint? How are you kind of determining what gets announced and who you partnership with?
spk06: I think we've been very vocal that we want to be a leader in this, and so we have the ability to have those investments introduced to us early on, and we would do our due diligence as we would any capital investment or any acquisition. We tour facilities, meet with management, understand ultimately what their level of technology know-how are, what their scale ambitions are to expand the technologies and know-how, geographically where they reside versus other locations, and we're actually going to produce the product. All those are factored into the analysis.
spk11: Excellent. I'll turn it over. Thank you.
spk12: We are at the hour, and please limit the final questions to one question. Your next question is from Mike Layton from Barclays. Your line is open.
spk18: Great. Thanks, guys. I'll be brief. I just wanted to ask on the shifting guidance to EPS from EBITDA. Maybe you could just flesh out some of the thinking on why you now felt this was the right time for the company to do this. And relatedly, I think historically annual incentive comp was largely driven by an adjusted EBITDA target. So when we see the proxy come out shortly, should we see that shift to EPS moving forward? Thanks. Thanks.
spk09: Yes, sir. I think the EPS is, you know, just simply to align to peers. And with respect to, you know, EBITDA, obviously that's the starting point for EPS. So certainly it's the largest driver of our earnings. So still a very important metric relative to the company's performance.
spk12: Your next question is from Mike Roxlin from TruVest. Your line is open.
spk03: Thanks very much, guys. Just one quick question. You mentioned that inflation doubled in fiscal 4Q, and you highlighted some non-material items, pallets, boxes, miners' cards. What's the time period in which you can recover those items? I believe that every time you try to improve your contracts with your targets, you can recover increasing cards sooner. So given the rapid rise in those inputs, you know, one, what's the time period you have recovered them? And two, are you looking to rework your contracts with your other suppliers as well to allow for faster recapture?
spk06: Yeah, on the other raw materials, it really is a mixed bag. And to be frank, we've been pursuing price active and often, you know, relative to recapturing that inflation. You know, during these periods of time when you have instability and, In supply chains that you've seen over the last 18 months, the primary objective for the customer often is supply, first and foremost. And everyone's dealing with that. And when we talk about supply chain, it's not necessarily just on a bare end. In some instances, certainly like we saw in our CPI organization in Europe, it's the fact that the end users themselves could not get the components for the required materials that they were purchasing from us. Or in the United States, a component that would ultimately allow a filling line to fill prescribed material, they may not need the material. It's been felt by everyone. This is not an era where it's just from one company to another. We're all in it together. We're passing it on. We're focused on doing it in a fair and balanced way. We remain 100% committed that we will recover 100% of that inflation and be price-cost neutral by the third quarter.
spk09: Our agreements are coming up perpetually. They're continually coming up. We don't have all of our agreements on a specific date. So they're coming up with customers on a daily, weekly basis.
spk12: Your next question is from Jeff Zikakis from JP Morgan. Your line is open.
spk19: Thanks very much. If it turned out that polyethylene and polypropylene prices dropped another 15 cents a pound over the next three months, how much more would you earn?
spk09: Yeah, I don't know. There's a lot of variables in that, depending on when it goes down. Customer agreements work differently in terms of the trigger points. I mean, you can look at our earnings through different cycles. We have pretty efficient pass-throughs. Again, there is a modest timing lag And again, it's going to vary by customer. So there's no, unfortunately, formula I can give you that for every penny of blank, you know, it equates to blank of earnings because it really depends on the timing and the grade and the mix of business. It's unfortunately not a mathematical formula that I can provide. But obviously, in total, we experienced a lot of headwinds last year as it related to timing lag. And certainly for the extent of drops, you know, that would go the other way. It would be a windfall at Thompson.
spk19: How much were volumes affected by supply issues in 2021?
spk09: Yeah, I would say hard to, again, get an exact number for that. I think the best way we've looked at it is coming into the quarter, we expected low single-digit volume growth. And, you know, we came in, you know, minus one. So two to three percent is probably our best estimate at the impact that it had on Q4 quarter.
spk19: Great. Thank you.
spk09: Thank you.
spk12: Your next question is Salvador Quijano from Seaford Research Partners. Your line is open. Yes, hi.
spk15: So a little bit on... On volumes, again, try to understand, given what's happening with the supply chain, and as you just mentioned, the 2% probably impact you had in fiscal before, what gives you confidence that you will still do 2% next year for the full year on average, if probably you're going to be challenged in the first part of the year? And secondly, I just want to clarify, is the 2%, including any impact from fewer days, or is it a comparable number? How should we think about that?
spk09: Yeah, it's an absolute answer. The numbers that we're providing are adjusting for the days. Just like we did in Cisco 21 when we reported we made the appropriate adjustments for the days, we'll do the same thing in future periods. With respect to supply chain, look, we are seeing some improvements, so I think that's what gives us confidence.
spk06: And in this, we spoke about it. We've got about $400 million in growth in 2022, all tied to capital investments that we've made. And we've factored in when those will become commercialized over the course of the fiscal year. So it's really based on those commitments and those capital investments that we've continued to make throughout the pandemic. Great. Thank you very much. Thank you very much. Yep.
spk12: Your last question is from . Your line is open.
spk16: Good morning, guys. And I apologize in advance for somewhat of a long-winded question. But it's two-part. One is I'm a little surprised we're not thinking about kind of the inflation that might hit the consumer next year. And in short, what has been sort of your experience in terms of trade-down effect And I'm thinking about just, I don't know, template steel that could be up 100% next year and what that does for a cost of a can of peas or something like that. So again, if there's any benefit or thought around that. And then longer term, what we've seen here recently, kind of the vulnerability of our supply chain or the supply chain, particularly on the kind of steel aluminum side to what some other countries may or may not choose to do. as well as the energy intensity of those competing substrates, how are your customers thinking about risk mitigation and cost of packaging? And again, given the fact that a lot of the inflation that we saw kind of on the resin side at least was probably more weather-related as opposed to what was going on, again, in other parts of the world, just trying to understand the cost competitiveness of plastics and energy intensity versus other substrates.
spk06: Yeah, I'll answer it best I can. But if you look at our portfolio, the diversity of it, and how we're ultimately able to consistently and dependably deliver free cash flow earnings year in, year out, it's really the nature of the portfolio. And they're amazingly resilient. And we've seen in previous economic recessions or otherwise, or downturns or periods of diversity, our product categories hold up very, very well. These are not discretionary. They're products that, to a large extent, people have to consume every day, and they continue to do so. I have, and we have, no concerns about the resiliency of this growing raw material that we ultimately convert, that being plastics, and its competitiveness versus other substrates. I would argue it continues to be a preferred material in the markets in which we serve. The advantages that it brings our customers, both in terms of some of their sustainability goals and objectives, lightweighting, and as I said, the cost competitiveness and the feature benefits in terms of engineering design, are most optimal with plastics as a substrate. And you've seen us have success And, you know, we continue to believe that we'll be a low single-digit grower and then some long into the future based on the robustness of the portfolio and the materials that we use. Thanks. Well, listen, guys, I appreciate all your interest in our company. We're about 15 minutes past the hour, and we just want to extend our thanks and appreciation. Continue to stay safe, and we'll talk to you at the next call. Take care.
spk12: This concludes today's conference call. Thank you for participating. You may now disconnect.
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